The city needs to be more aggressive in collecting delinquent real property taxes and consider actions such as fines or denial of city services to compel payments from those who continually skirt their taxes, according to a city auditor’s report.

The city also should seek to develop formal agreements with government land lessees to ensure timely collection of taxes from those landowners.

City officials dispute the conclusions and say the recommendations “would not provide value” to the city.

“Therefore, we cannot agree with the recommendations and will not be taking any further action,” city Budget Director Michael Hansen said in his written response to the auditor.

City Council Chairman Ernie Martin said the city administration should take a hard look at the auditor’s recommendations.

“It is difficult to defend any reason to allow delinquent accounts to go unpaid for years,” he said in a statement. “In fairness to all taxpayers who comply with the law, the administration should be more aggressive on chronically delinquent accounts.”

Real property taxes are the city’s primary source of income, accounting for nearly two-thirds of the city’s total revenue in the 2010 fiscal year.

The city’s collection practices allow private landowners to remain on extended payment plans, city Auditor Edwin S.W. Young wrote in his report to Martin.

Foreclosures are rare, and many have learned how to game the system, he said.

“As a result, the outstanding balance of delinquent real property taxes is increasing and large amounts remain uncollected for many years,” Young said. “If tools existed … for denying delinquent taxpayers city services (such as licensing, vehicle registrations, permits), there may be greater incentive for delinquent taxpayers to pay their real property taxes.”

In the year ending June 30, 2010, the city was owed $16.8 million in delinquent property taxes and collected $7.9 million, or 47 percent, the audit report said.

With regard to government lessees, the city cannot foreclose or file timely liens on properties due to incomplete or untimely information, Young said.

In addition to penalties and formal memoranda of agreements with government lessees, the audit also recommended various bookkeeping measures to improve city policies and procedures.

Hansen criticized the audit as misleading and not taking into account the overall state of the economy.

“Real property tax delinquencies spiked each time a major recession occurred,” he noted.

He added that the audit was selective and looked at only 79 parcels from a total of 7,765 delinquent parcels, and that the recommended actions would be ineffective and impractical.

“Delinquent taxpayers are experiencing hardship where they are unable to pay their real property taxes,” Hansen wrote, adding that denying services could have unintended consequences such as more unlicensed drivers or unregistered vehicles.

He described other proposed recommendations as duplicative and unnecessary.